12/05/2016

NYK Bulkship (Atlantic) NV v Cargill International SA (“The Global Santosh”) [2016] UKSC 20

The Supreme Court (Lords Neuberger, Mance, Clarke, Sumption and Toulson SCJJ) has handed down judgment this morning in The Global Santosh [2016] UKSC 20, which concerned the meaning of “charterers’ agents” in a very common additional off-hire provision.

The Appellant, Cargill International SA (“Cargill”), had time chartered The Global Santosh (“the Vessel”) on the Asbatime form. The time charter provided that the Vessel was off hire for any period of detention or arrest, unless such detention or arrest was “occasioned by any personal act or omission or default of the Charterers or their agents”. Cargill sub-voyage chartered the Vessel. She carried one of six shipments of cement sold by Transclear SA (“Transclear”) to IBG Investment Ltd (“IBG”) on C&FFO terms. Under the sale terms, IBG was responsible for the unloading of the cargo and was liable to pay demurrage to Transclear for delay in unloading. Transclear obtained an arrest order to secure its claim in demurrage against IBG, which mistakenly named the Vessel as its object. Neither the Vessel nor the Respondent disponent owners, NYK Bulkship Atlantic NV (“NYK”), had any involvement in the dispute between Transclear and IBG. In those circumstances, the central question for the Supreme Court was whether the arrest was occasioned by Cargill’s “agents” within the meaning of the time charter’s proviso.

A majority of the Court (Lords Neuberger, Mance, Sumption and Toulson) allowed the appeal and overturned the Court of Appeal’s decision (expressed in Gross LJ’s judgment, with whom Gloster LJ and Sir Stanley Burton agreed: [2014] 2 Lloyd’s Rep. 2013), dismissing NYK’s appeal under section 69 of the Arbitration Act 1996. Lord Sumption (with whom Lords Neuberger, Mance and Toulson agreed) identified two difficulties in the Respondent’s claim, which in his view, were decisive. First, the contractual arrangements were such that any cargo handling operations that occurred were carried out on Cargill’s behalf in the vicarious performance of Cargill’s obligations under the time charter. However, Cargill’s responsibility for IBG’s acts or omissions extended only to acts or omissions in the actual performance of cargo handling operations.  IBG’s failure to discharge the cargo sooner was not the vicarious exercise of Cargill’s rights nor a breach of any obligation of Cargill. Secondly, incurring or enforcing a liability for demurrage under a sub-contract by way of the Vessel’s arrest was not the vicarious exercise of a right under the time charter. Further, Lord Sumption considered the Court of Appeal’s analysis of the parties’ respective “spheres of responsibility” to be unhelpful.

However, Lord Clarke took a different view in a carefully reasoned dissenting judgment. In his view, the agency extended to the operation of the Vessel from at least the time that the notice of readiness was given until the discharge was completed. An arrest occasioned while the Vessel was waiting to discharge was indistinguishable from an arrest in the course of the discharge operations, as in both circumstances the Vessel is engaged in the actual performance of Cargill’s obligations or rights. Further, Lord Clarke did not accept Lord Sumption’s distinction between the defective performance of cargo handling operations and the failure to undertake such operations.

 

For a fuller consideration of both Lord Sumption’s and Lord Clarke’s judgments, please refer to Daniel Bovensiepen’s Case Bulletin, Secret agents: Who are the charterers' agents? 

Daniel Bovensiepen acted as junior counsel for the Appellant, instructed by Holman Fenwick Willan LLP.

Timothy Young QC and Belinda McRae appeared for the Respondent, instructed by Skinitis Maritime Law Firm.